Mood improves, but unemployment on the rise
The business climate is improving but optimism is stunted by high interest rates, increasing unemployment and high taxes, according to a survey released last week by the Central Statistical Office (GUS) and interviews with businesspeople.
The government's monthly survey showed that the February industrial outlook improved for the first time since November, as the manufacturing climate index moved up four points while the construction and retail indices improved though remained negative.
"We were very positive and we remain optimistic, but a red light has switched on regarding the near future," said Thomas Schoutens, development manager for construction company CFE. GUS reported that the outlook for the construction sector was less pessimistic than in January, but was still worse than any other February since 1994.
Macroeconomic factors and a degree of economic uncertainty are stifling some sectors, however a situation that hurts one industry may help another. The zloty, for example, hit an all-time high against the euro and a 19-month high vs. the dollar last week. That hurts exporters but can benefit firms with foreign currency-denominated debt.
"The exchange rate is good for Telekomunikacja Polska (TPSA) if we have debt and foreign currency going down vs. the Polish zloty," said Tomasz Pokrywka, an analyst at TPSA.
Copper mining concern KGHM Polska Miedz, which exports about two-thirds of its product, is suffering from the strong currency. "The exchange rate is not favorable for us," said Wojciech Marciniak, investor relations director with KGHM. "This is an important factor."
While the overall GUS index improved and businesspeople say they remain optimistic, concerns regarding the economy are staying put. "There are some signs that show the economy is not improving," Pokrywka said. "The unemployment rate is high, interest rates are high, and the zloty is strong, which might have an impact on Polish exporters. The demand side is weakening. On the other hand the economy has been growing as a whole at a quite an impressive rate for more than 10 years."
High taxes are also a drag on the economy, he added.
Schoutens said that unemployment, which registered at more than 15% in January and is expected to worsen, is the true factor that sets the mood of the people. "People are concerned with their future. When at least one person in a family is affected by unemployment, that's a reason for pessimism," he said.
